Domestic Demand And Regional Growth To
Transform Brazilian Chemical Industry- A Closer
            Look At The Catalysts

...
Focus Points




 1. Country Profile and Macro Economic outlook

 2. Industry Coverage

 3. Industry Performance and Analy...
Brazil - Country Profile


Political Scenario      •   President - Luiz Inacio Lula Da Silva
                        •   P...
Brazil - Promising Macro Economic Outlook

              2100.00                                                          ...
Brazilian Chemical Industry- Industry Coverage



                                    Basic Chemicals


                  ...
Brazilian Chemical Industry- Key Features Of The Industry


                  Economic                       Contribution ...
Policy Initiatives And End User Industries

        Initiatives                    End user Industries


   Productive Dev...
Brazilian Chemical Industry- Key Industry Segments In 2007

                                                              ...
Brazilian Chemical Industry- Performance Of Some Key Industry
Segments In 2007


                                         ...
Brazilian Chemical Industry- Foreign Trade




                                                                           ...
Brazil – Trade Agreements



                                Key Trade Agreements

                                       ...
Brazil- Investment Incentives


                              Incentives for Investment


    •   PDP to promote investmen...
Brazilian Chemical Industry - Industry Attractiveness

      Economic Strength                                            ...
Brazilian Chemical Industry - Industry Attractiveness


Access to other countries in the region with         Consumer Chem...
Brazilian Chemical Industry – Drivers And Restraints



             Green field investment
             announcements in
...
Brazilian Chemical Industry – Growth Opportunities




                                                 Dyes,
            ...
Your Feedback is Important to Us

          What would you like to see from Frost & Sullivan?

Growth Forecasts?

Competit...
For Additional Information


•   To leave a comment, ask the analyst a question, or receive the
    free audio segment tha...
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Frost & Sullivan Brazilian Chemical Analyst Briefing

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Frost & Sullivan’s analyst briefing on the Brazilian chemical industry.

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Transcript of "Frost & Sullivan Brazilian Chemical Analyst Briefing"

  1. 1. Domestic Demand And Regional Growth To Transform Brazilian Chemical Industry- A Closer Look At The Catalysts Binu P. Paul, Senior Research Analyst Economic Research and Analytics Chemicals Materials and Food 16th October 2008
  2. 2. Focus Points 1. Country Profile and Macro Economic outlook 2. Industry Coverage 3. Industry Performance and Analysis of Segments 4. Drivers and Restraints 5. Growth Opportunities 2
  3. 3. Brazil - Country Profile Political Scenario • President - Luiz Inacio Lula Da Silva • Political outlook – Stable • Manufacturing constituted 35 % of GDP in 2007 • Privatization and Financial Assistance from the IMF – steady flow of Economy investments • Investors confidence and increase in consumption • PDP announced in May 2008 Monetary Outlook • Flexible exchange rate regime combined with inflation targeting • Inflationary pressures expected • Tax cuts amounting to $ 12.5 billion announced in May 2008 • The tax burden on chemicals industry is approximately 70% of the Fiscal Outlook value added by the industry • Public debt around 41 percent of GDP in 2007 3
  4. 4. Brazil - Promising Macro Economic Outlook 2100.00 18 1800.00 GDP at Current Prices 15 Inflation 1500.00 12 Percentage $ Billions 1200.00 9 900.00 6 600.00 300.00 3 0.00 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: IMF and Frost and Sullivan Factors driving the economy Expected macro economic outlook • Sustained growth in domestic demand • The economy is expected to grow at an average of 4.7 % during the period 2008-2013 • Increased foreign direct investment • The inflation in the economy is expected to be in • Stable consumer and investor confidence the range of 4 % to 5% during the period 2008- 2013 • Total investment expected to be 21% of GDP by 2010 4
  5. 5. Brazilian Chemical Industry- Industry Coverage Basic Chemicals Synthetics and Fibers Fertilizers and Agricultural Chemicals Brazilian Chemicals Pharmaceuticals Industry Consumer Chemicals Materials Other Chemicals 5
  6. 6. Brazilian Chemical Industry- Key Features Of The Industry Economic Contribution to the total GDP was growth to 3.2 percent in 2007. support demand Energy and Competitive ness depend Net revenues in 2007- $103.5 Billion feedstock shortages on exchange rate stability Chemical and wages Share of exports- 6.6% Industry 2007 Share of imports- 19.8% Globalization Higher and Investors Average capacity utilization in 2007 Privatization Confidence was 87 % induce investment Regulatory barriers The industry provides 340 thousand remain high direct employment opportunities. 6
  7. 7. Policy Initiatives And End User Industries Initiatives End user Industries Productive Development Policy Package (PDP) Construction Growth Acceleration Programme (PAC) Energy Agro Energy plan Transportation Agriculture PROFARMA Healthcare PRONAF Perfumes 7
  8. 8. Brazilian Chemical Industry- Key Industry Segments In 2007 • Chemical products for industrial Sectoral Composition of the Brazilian Chemical Industry use, is the biggest segment in the (2007) Brazilian chemical industry and 2% accounted for 53.2 percent of the 5% 5% 3% total sales in the industry 9% • Sales in industrial chemicals segment was $ 55.1 billion in 2007 • The pharmaceutical products segment accounted for 14.6% of 9% 53% 14% the total sale in chemical industry Industrial Chemicals Pharmaceuticals Fertilizers Personal Care and Cosmetics • The remaining segments such as Soaps and Detergents Crop Protection perfumes and cosmetics, Paints and Varnishes Others fertilizers, soaps and detergents, Source : ABIQUIM crop protection, paints and varnishes and others together, accounted for 32.2% of the total sales in 2007 8
  9. 9. Brazilian Chemical Industry- Performance Of Some Key Industry Segments In 2007 Paints and Materials Varnishes Thermoplastic resins Glues Adhesives and Dyes and Pigments Sealants • Produced more than 4.8 • Production increased • Imports increased 13% from million tones of 6% over 2006 2006 and were valued at $ 514.8 thermoplastic resins in 2007. million. • Growth in automotive, • Imported 691.7 thousand packaging, and construction • Exports came down by 1% and tons of thermoplastic resins in amounted to $144.4 million 2007 which is 23.9 % more than 2006. • The trade deficit in the sector was $370 million. • Per capita consumption increased by 6.9% from 2006 to reach 26.09 kg. 9
  10. 10. Brazilian Chemical Industry- Foreign Trade 31.03 32.46 29.61 35 28.18 26.75 25.33 30 23.90 19.54 25 Exports Imports 18.07 17.40 16.59 $ Billions 15.30 15.12 14.50 20 13.65 12.17 11.00 10.80 10.70 10.70 10.10 15 8.90 7.40 5.90 10 4.80 4.00 3.80 3.50 5 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: ABIQUIM and Frost and Sullivan Major export destinations – Mercosur countries, United states and Canada • Brazilian chemical exports grew 19.6 % in 2007, and was valued at $ 10.7 billion. The country imported $ 23.9 billion worth chemicals in 2007. • Brazilian chemical product balance of trade deficit was over US$ 13.2 billion in 2007. 10
  11. 11. Brazil – Trade Agreements Key Trade Agreements Mercosur- Mercosur Andean GCC Mercosur- EU (1995) Community (2006) (2005) Mercosur- Venezuela Israel SACU Mercosur- (2006) (2007) (2004) India (2005) • The EU- Mercosur FTA is currently being negotiated. • A proposal for an establishment of a free trade agreement between the Mercosur and the countries of the Gulf Cooperation Council was proposed in August 2006. • The Economic Complementation Agreement signed between the Mercosur and, Andean Community members, went into effect in 2005. • A Preferential Trade Agreement was signed in 2004 between Mercosur and South Africa Customs Union (SACU) 11
  12. 12. Brazil- Investment Incentives Incentives for Investment • PDP to promote investments in agribusiness, bio diesel, perfume and oil and gas • Close to $130 billion finance for machinery and infrastructure • Equal treatment for local and foreign investors. Brazilian Congress approved an amendment to eliminate the difference between foreign and national capital • State and local government provides investment incentives through reduction in indirect taxes • Tax concessions including reduction in Federal Income tax is given for companies that are set up in the poorer North East and Amazon Region • Incentives are given to companies for the promotion of export 12
  13. 13. Brazilian Chemical Industry - Industry Attractiveness Economic Strength Factor Market Condition • The average annual GDP growth is projected to be around 4.2 • Skilled labor force percent in during the period • Lower wage rate compared to 2008-2013. Developed countries • Domestic demand is to act as a • Improved feedstock availability powerful engine of growth. • Growth in end user industries. Industry Attractiveness Investment Climate/ Business Environment Domestic Demand • Growth in industry groups such as • Political situation is relatively Automotive, Packaging, and Housing stable barring strikes and construction sector indicates potential for chemical industries • Brazil is the most favorable investment destination in • Strong industry linkage is expected to Latin America sustain the demand growth for chemicals 13
  14. 14. Brazilian Chemical Industry - Industry Attractiveness Access to other countries in the region with Consumer Chemicals and Pharmaceuticals similar growth opportunities Chemical industries in Brazil is to benefit Sustained income growth and consumer greatly from the fast growing neighboring spending is to increase demand for countries that are part of the RTA Mercosur consumer chemicals and Pharmaceutical products Large Internal Market with Unexploited potential Expansion of Petrochemical sector The chemical trade deficit in Brazil points at the enormous investment opportunity in Expansion of petrochemical sector is to create the country. The growth is most likely to be opportunities for the suppliers of equipment and driven by the fast growing automotive, civil services for petrochemicals construction and packaging industry 14
  15. 15. Brazilian Chemical Industry – Drivers And Restraints Green field investment announcements in D Regional petrochemical sector R Domestic Integration I Demand V E R S R E S T R A I High interest N Feed Stock Availability rates T Taxation S 15
  16. 16. Brazilian Chemical Industry – Growth Opportunities Dyes, Pigments, Adhesives Fertilizers and Thermoplastic s Growth Opportunities Consumer chemicals Industry and chemicals Pharmaceuti cals 16
  17. 17. Your Feedback is Important to Us What would you like to see from Frost & Sullivan? Growth Forecasts? Competitive Structure? Emerging Trends? Strategic Recommendations? Other? Please inform us by taking our survey. 17
  18. 18. For Additional Information • To leave a comment, ask the analyst a question, or receive the free audio segment that accompanies this presentation, please contact Stephanie Ochoa, Social Media Manager at (210) 247- 2421, via email, analystbriefings@frost.com, or on Twitter at http://twitter.com/stephanieochoa. 18
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